FMCG Q1 Results Preview- Volume Improving; Potential Boost From Monsoon, Govt Actions Anticipated: Nirmal Bang

Nirmal Bang Report

Early commentaries from some fast moving consumer goods players like Marico, Dabur and Godrej Consumer Products and our interactions with the management of other consumer staple companies suggest that the overall demand environment is showing some initial signs of improvement in growth.

Volume growth is elevated compared to previous quarters partly on account of a favorable season for some companies and due to grammage increase by some others to pass on the decline in raw material costs.

Q1 FY25 is likely to witness stable to modest YoY gross margin expansion for several FMCG companies due to deflation in RM prices, but rising ad spends, moderate realisation growth vs preceding quarters mean that cumulative Ebitda margin is likely to remain flat, with absolute Ebitda growing slightly slower than revenue growth.

However, as highlighted in our commodity cost note released earlier this week, prices of raw materials such as Vegetables and Brent crude remain elevated on a YoY basis.

We are expecting our FMCG coverage universe to clock mid single digit revenue growth of ~5% YoY.

We have downgraded Britannia Industries to Accumulate from Buy post the recent rup-up in its stock price. We had recently upgraded Dabur to Buy as a preferred play on potential rural recovery.

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